In its analysis, the economic policy think tank described the Budget as ‘a bit of a gamble’ with public finances, arguing that the planned £20bn increase in spending on the NHS is set to be funded via better than expected borrowing figures, rather than through tax rises.

IFS director Paul Johnson said: ‘Suppose the public finance forecasts deteriorate significantly next year. They might. There is perhaps a one in three chance of that. What will he do then?

‘It is hard to see austerity starting up again with promised spending increases not materialising. The chances of getting sizeable tax rises though parliament are next to nil.

‘It is surely borrowing that would take the strain. Fair enough. That is a judgment. But it is a judgment that could see debt ratchet upwards.’

IFS calculations show personal allowance will be 55% higher than it was back in 2009-10 following Philip Hammond’s announcement it will rise to £12,500 one year earlier than planned. This means there will be nearly six million fewer income tax payers than there would have been had the allowance only been raised in line with prices since then.

However the IFS point out that even after an increase to £50,000, the higher rate threshold will be around 9% lower in real terms than it was in 2009-10 with the result that there will be around 1.2m more higher rate taxpayers than there would have been had it risen in line with inflation.

In its analysis, the IFS highlights the cut in business rates for small retailers, a temporary increase in investment allowances and an industrial buildings allowance, changes to the rules governing the taxation of self employed contractors working for larger private companies, and the new digital services tax as the most significant of the Chancellor’s moves.

However, the think tank states: ‘At this point that each of these changes represents no more than a short term sticking plaster solution to some big underlying problems with the tax system.’

As regards the digital services tax of 2% on large digital platform provides, which it is estimated will bring in around £440m a year, the IFS says that while this will raise some more tax from the tech giants, it leaves allocation rules unchanged and simply adds a new tax on top, rather than addressing the central issue of how profits from multinationals are allocated to different countries. The institute points out that turnover taxes disadvantage high cost, high revenue business models.

While welcoming increases in capital allowances, which the IFS says may make some companies bring investment forward, it also says there remain distortions in the tax base because while some investments are subsidised, others are taxed.

On the IR35 off payroll rules extension to the private sector, the IFS says this has the effect of moving the effective boundaries in the tax system, by changing where the boundary between employees and owner-managers lies and adding a new boundary between small and big private sector engagers. However, it does not clarify which individuals or businesses should pay lower tax rates.

Report by Pat Sweet